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Module 1_Part 1.3

Contract Management is a multi-stage process ensuring parties meet their obligations throughout the contract's duration. Construction contracts define the scope of work, time frames, costs, and payment provisions, with common types including Lump Sum, Cost Plus, Time and Material, and Unit Pricing contracts. Specifications outline the minimum performance requirements and administrative matters for the work involved.

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CHARISMA LOZANO
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4 views

Module 1_Part 1.3

Contract Management is a multi-stage process ensuring parties meet their obligations throughout the contract's duration. Construction contracts define the scope of work, time frames, costs, and payment provisions, with common types including Lump Sum, Cost Plus, Time and Material, and Unit Pricing contracts. Specifications outline the minimum performance requirements and administrative matters for the work involved.

Uploaded by

CHARISMA LOZANO
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Module 1.

3 (Contracts and Specifications)

Contract Management could be defined as a multi-stage process that goes on through the entire duration
of the contract and ensures that the parties meet their contractual obligations in order to deliver the
specific objectives provided in the contract.

- According to Fédération Internationale Des Ingénieurs – Conseils (from French, the International
Federation of Consulting Engineers) or FDIC, a contract means the general conditions, the
supplementary conditions, the specifications, the drawing , the bill of quantities, the letter of
Acceptance and the contract Agreement.

Contract is a mutual agreement between two or more parties that something shall be done, an agreement
enforceable at law.

Describe Scope of work

- Establish time frame


o Set fourth obligations and relationship
o Minimize dispute
- Establish cost and payment provision
o Improve Economic return of investment

Construction Contract provides important protection for the parties to the contract and for both
contractors and homeowners or the owners of the project or building if the project is a commercial
construction project.

The most important aspect of a construction contract - and from where most of dispute arise are:

1. The definition of the scope, i.e. what exactly has to be done, and what happens if the changes are
required or desired along the way;
2. When the works have to be concluded and what happens if they are concluded on time;
3. When payments are due and what happens if they are not paid on time;
4. Technical specifications and quality and performance requirements and what happens if the
agreed standards are not met.

Construction Contract Types are usually defined by the way, the disbursement is going to be made and
details other specific terms, like duration, quality, specifications, and several other items.

4 Common types of Construction Contracts

1. Lump sum or Fixed Price contract

This contract shall be used when the risk needs to be transferred to the builder and the owner wants to
avoid change orders for unspecified work.

- Total fixed price for all construction related activities


- Can include incentives benefits for early termination, or can also have penalties, called liquidation
damages, for a late termination
2. Cost Plus Contract

This type of contract involves payment of the actual costs, purchases or other expenses generated directly
from the construction activity.

Multiple variations of cost plus contracts and the most common are:
1. Cost plus Fixed Percentage
2. Cost plus Fixed Fee
3. Cost plus with guaranteed maximum price contract
4. Cost plus Fixed with guaranteed maximum price and bonus contract
- Are used when the scope has not been clearly defined and it is the owner responsibility to
establish some limits on how much the contractor will be billing.
- Involve payment of the actual costs, purchases or other expenses generated directly from the
construction activity.
- Must contain information about covering contractor’s overhead and profit.
3. Time and Material Contracts
- Preferred if the project scope is not clear or defined
- Must establish hourly or daily rate
- Include additional expenses that could arise in process.
4. Unit Pricing Contract
- Commonly used by builders and federal agencies.
- Unit prices can also be set during bidding process as the owner requests specific quantities and
pricing for a pre-determined amount of unitized items.

Contract Conditions usually included in the book of specifications (or in the accompanying architectural
drawings) of a contract, that set the minimum performance requirements for the contractor.

- Set out the principal legal relationship between the parties to a construction project, determining
the allocation of risk and consequently, price.

Specifications is the part of the contract that consists of written requirements for materials, equipment,
systems, standards, and workmanship as applied to the work, and certain administrative requirements and
procedural matters applicable to the work.

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